Problematic Working Conditions Among Contract Workers in the Italian Shipbuilding Industry

Construction at the Marghera shipyard in Venice. Source: Wikimedia Commons

Fincantieri is an Italian shipbuilding company that has expanded its global reach through a series of acquisitions and agreements and is portrayed as a respected and successful company. However, behind the façade of its industrial and commercial succes lies a darker reality of exploiting temporary workers and subcontractors to achieve its success.

Fincantieri makes extensive use of subcontracting related to the direct production of their ships. The number of contract workers and subcontracting firms within the Italian shipyards is very high: generally the ratio of direct employees to subcontracted employees is 1 to 4 or 1 to 5.

In its Marghera shipyard in Venice, for example, more than 80 per cent of the hours dedicated to ship construction are performed by workers under temporary contract and subcontracting companies. The hours worked by Fincantieri’s direct employees, by contrast, are limited to supervisory, coordination and assistance activities (such as handling of mechanical equipment, e.g. operating cranes).

This means that all directly productive activities—metal carpentry, welding, ship block assembly, pipe and plant assembly, engine fittings, cabin fittings, etc.—are carried out by contract workers and subcontractors.

In the Marghera Shipyard, the per-capita cost of Fincantieri employees, calculated for all employees, including executives and managers, exceeds 67,000 euro. The average per capita labour cost of Fincantieri blue and white-collar workers is 55,551 euro. On the contrary, for temps and and subcontractors, it is between 29,880 and 34,660 euro. This is, on average, more than 20,000 euro less than Fincantieri employees receive. This discrepancy can be seen just as clearly in average hourly wages. For Fincantieri employees, it is EUR 31.14, while the average hourly cost of contract workers and subcontractors is between EUR 17.68 and EUR 19.43. The wage disparity is obvious.

Work Breakdown Structure (WBS) method

 All this is, of course, not an accident, but the result of a precise system applied by Fincantieri. Fincantieri uses the Work Breakdown Structure (WBS) method, which allows the ship to be broken down into all its constituent parts: breaking down the product into its individual parts (Product Breakdown Structure) and breaking down the overall cost (Cost Breakdown Structure) into each individual component.

For example, a cruise ship consists of the hull, the propulsion system, everything related to cabins, service areas, catering, cinema-theatre rooms, etc. In turn, each of these is subdivided into further parts according to the levels of detail of the WBS. In this way, the breakdown of the overall product becomes more and more detailed. Once the ship has been subdivided, it is possible to attribute a cost to each of its components using the Cost Breakdown Structure tool.

The cost of each individual component is determined by various items, including the materials, the equipment used and, above all, the labour required to manufacture it. The individual parts can be purchased (and in this case the cost of each one corresponds, trivially, to its purchase price) or produced in-house; this is the famous ‘Make or Buy’ alternative. Each of these elementary parts may require either a working (production) process or part assembly. In both cases, both the production and assembly of a part must first be ‘timed’ and then ‘costed’.

At this point, another function of the WBS comes into play, which is the breakdown of a process/activity (Activity Breakdown Structure, ABS). In this case, the WBS, by means of ABS, defines how the activities are organised (production, assembly, set-up): in essence, it defines the work processes for each individual micro-phase on the basis of their characteristics. 

These characteristics may concern the physical aspects of the product to be manufactured (e.g. the length of the sheet metal to be welded, the physical shape of the sheet metal—straight, curved, etc.); or the characteristics of the activity to be performed (e.g. laying electrical cable in certain spaces of the ship, etc.). 

To determine the cost of each operation, a time is assigned to it. How is this done?

For each ship, Fincantieri defines an overall budget of hours for its construction based on the design. To calculate how many hours of work are needed, Fincantieri uses a computer system in the form of a spreadsheet indicating how much time is needed to complete each job (for example, to finish one metre of welding): thus it calculates both the hours to be assigned to its own employees and—above all—the hours to be assigned to the subcontracting companies (which now carry out almost all the production work). 

The computerised calculation of the work process is highly problematic

Obviously this point is decisive: it is this calculation method that defines the time that is allocated to each task in the production process.

One issue is that sometimes the drawings are incomplete: as a result, not all the necessary machining operations are taken into account, which considerably reduces the calculated working time.

Secondly, since the calculation of the working time of each phase takes place in a more or less automated manner, this calculation often does not take into account all the difficulties, constraints, critical issues that may arise and that may condition a given evaluation: the computer system, therefore, performs a rigid and standardised evaluation based only on documents, only a ‘basic evaluation process’ of the time required.

It is very important to emphasize the shortcomings of the schematic, superficial nature of the calculation. To correctly analyse and evaluate the time needed for each task, one must take into account longer working times that may result from difficulties, constraints, peculiarities, possible problems that can arise during implementation, etc. Taking these problems into account would make it possible to define target hours that take account of the actual time needed to overcome these difficulties. But it is precisely on this point that the company exerts pressure to limit projected working time.

The more working hours are recognised as necessary, the greater the allocated lead times and, from Fincantieri’s perspective, the higher the resulting costs. The objective, therefore, is to avoid any surcharges on hours to the calculation of working hours as much as possible, regardless of actual production conditions. Thus the calculation of working time is a purely economic calculation.

The calculation is done on the basis of standard conditions that do not take into account the concrete characteristics of the vessel to be produced or any possible imperfections in the materials or problems related to the sequence of operations. For example: it is one thing to calculate the number of hours required for an assembly to be carried out on a perfect wall, it is quite another to carry out the assembly where there are no joints between the blocks. These spreadsheets, therefore, being constructed ‘at a desk’, do not allow to account for the concrete reality in which the ships are actually constructed. Consequently, the resulting calculation of man-hours is highly biased.

Further, this calculation of man-hours does not take into account so-called Non-Conformities (NCs). NCs are those works that a contracting company has to carry out and which are due to operations/activities not contemplated in the project or not clearly indicated in the project in its manner of execution (e.g. pipe assembly, installations, etc.). 

If an NC involves extra work (e.g. instead of 10 hours as per the specifications, 15 hours are actually needed), this should theoretically receive prior approval before proceeding. In reality, what happens is that the contracting company first carries out what it is supposed to do and then requests approval for the extra work it has done. But in several case these requests have been rejected by Fincantieri.

Yet another issue is that the contracted companies are often not qualified. They are small, are inexperienced and have a weak financial profile. Most of the time the contracted companies lack any bargaining power with Fincantieri and are forced to accept the conditions (above all economic) that it imposes. Finally, in other cases, the owners of these companies are perfectly aware that they are acquiring low-cost contracts and pass this financial pressure onto the wages of their workers. 

Conclusion: Fincantieri’s system provides unacceptable working conditions for contract workers

To summarise, the Fincantieri system for building a ship can be listed as follows:

  • the massive use of tenders;
  • a method of calculating man-hours deliberately aimed at reducing the number to keep costs low;
  • the use of small contract companies, often unqualified and forced to accept disadvantageous economic conditions;
  • contracted companies which often, aware of the low value of the contract, accept it anyway, knowing that they will be able to unload economic constraints onto the wages of their workers.

All of this contributes to unacceptable working conditions for most contract workers. For these reasons, the FIOM-CGIL trade union of Venice and the Veneto has initiated a hard fight to address these problems. Recently, the judiciary has also opened an inquiry to ascertain the conditions of worker exploitation. This outcome was the result of the struggles of FIOM-CGIL.